The used car industry awaits Shopify

In the overall chaotic and disorderly competition in the used car industry, Shopify is a viable direction for exploration.

As a spoiler global retail industry a new force amount, Shopify already is the absolute focus of public opinion field.

Although Ali in the world ranking in transaction size, Shopify lost from China, Jingdong and fight a lot , and Amazon also has a considerable gap, but by 2020, almost 100% growth rate, and more than $ 180 billion market capitalization, sufficient Let Shopify become the new favorite in the eyes of capital.

Correspondingly, many domestic companies have begun to learn from Shopify’s business model, and some e-commerce platforms even claim to be “China’s Shopify”. However, in the highly centralized Chinese e-commerce arena , it may not be an easy task to pry a crack in the consolidated market like Shopify.

However, in an industry where there is a lack of giant players and the overall competition is chaotic and disorderly, Shopify is a viable direction for exploration, such as the second-hand car market where e-commerce has repeatedly broken down.

01  Shopify integration and adjustment

Why is Shopify able to rise by chance under the aura of Amazon’s hegemony? There is no shortage of self-justified answers.

Some people attributed the Amazon effect, such as Amazon WebStore shut down in 2014 after the service, even recommend customers try Shopify; both were still in 2017, taking a step forward in the cooperation that Amazon allows goods pass through Open API open, then Distributing on Shopify… Accustomed to the drama of blocking each other among domestic Internet giants, Amazon’s behavior is tantamount to raising a tiger.

Some people also gave an explanation from the perspective of merchants. Even if e-commerce giants like Amazon pursue the concept of “customer first”, some of the “overlord clauses” of the platform have caused merchants to complain. So much so that Shopify founder Luke’s analogy is widely circulated on the Internet: Amazon is trying to build an empire, and what Shopify is doing is to provide an arsenal for those who want to resist Amazon.

If you look at Shopify and Amazon in light of the pain points of the domestic used car market, there are actually two different paths compared to the “empire and rebel” metaphor.

Amazon’s business model once the electricity supplier industry paradigm: Bezos set up a centralized trading platform, in thousands of million to provide standardized services to the home, and are charged for the service. Under the action of time, a positive cycle has gradually formed. The base of merchants on the platform has grown larger and larger, attracting more and more loyal consumers, and the stickiness of consumers is also the capital for Amazon to gain a foothold in the capital market. .

Shopify has found a reverse thinking. It is also a platform for providing services. Shopify’s focus is not on traffic, but on providing SaaS tools for merchants to help merchants build independent websites and freely choose which functions they need. The cornerstone of Shopify’s business lies in the integration and scheduling of resources such as traffic, marketing, commodities, logistics, and finance. Through open connections and ecological cooperation, conflicts of interest with merchants are avoided.

Many domestic players trying to reinvent the used car market, to some extent, is Amazon’s loyal is the letter only, namely the establishment of a centralized platform to self-mode. Although some players put forward a strategy of opening up to second-hand car dealers after hitting a wall, the roles are no different from third-party merchants on Amazon.

It’s just that second-hand cars are not standardized products. They involve complex processes such as car collection, evaluation, marketing, transportation, and transfer. They belong to a typical buyer’s and seller’s market, and under the situation of information asymmetry, it is difficult for users to know a certain platform. To generate trust, even after going through rounds of crazy money-burning marketing. As a result, the domestic used car market has a long and complex industrial chain. A large number of small and medium car dealers have become the main force in the used car market. A centralized mechanism like Amazon is destined to touch the interests of offline car dealers. Not suitable for high-priced and low-frequency consumption scenarios.

Shopify, which does not use traffic as an entry point, seems to be more in line with the taste of the used car industry. After all, the market is highly fragmented and diversified. What car dealers need is digital tools and refuse to be coerced by the platform.

02Exploration  of SaaSization of Used Cars

China does not lack for used car SaaS companies, it has been found in large search the car , all to help car, car Fung net players.

Especially after the second-hand car e-commerce company Carvana was recognized by the capital market, data-driven has gradually become the mainstream voice of the second-hand car industry, and many domestic companies have also begun to explore the direction of data-driven. Perhaps some players have not yet called out the goal of “Shopify in the second-hand car market”, and they are quite close in concept.

For example, Che Yi Pai , the main online auction service for second-hand cars, integrates the SaaS services of Dasouche on the basis of connecting 4S dealers and second-hand car dealers to help dealers build second-hand car services in a “data + intelligence” drive. system. As a “seller” 4S dealers can open stores on the platform, freely choose services such as valuation, testing, warehousing, transfer, and logistics, and make decisions based on data science.

It’s just that among the major players in the domestic used car market, although car dealers, used car dealers, and used car e-commerce account for a large proportion, they are often in a situation where they are fighting each other. The sales of second-hand car dealers are far behind. New cars and second-hand car dealers are generally small in size and have a typical regionalization. Second-hand car e-commerce companies skipped dealers and second-hand car dealers, and reworked the offline formats online.

If you want to implement Shopify’s business model in such a market, there are bound to be various obstacles, and it is also the root cause of the difficulty in the second-hand car market to be transformed.

However, under the influence of incentive measures such as replacement of car purchases, 4S dealers have gradually changed their attitudes towards second-hand cars, and they are now one of the main car source suppliers. But at this stage, second-hand cars only account for 2.7% of the total revenue of Chinese dealers, far less than the 30% of their American counterparts. The reason is that dealers need to invest a lot of manpower and material resources in terms of vehicle management, processing, testing, evaluation, and down in the number of tour under no circumstances, according to China Unicom, may also occur due to excessive loss of vehicle turnaround cycle.

Therefore, players such as Cheyipai set their sights on 4S dealers, providing business consulting, vehicle source acquisition, inventory management, intelligent marketing, evaluation and testing, sales analysis and other tools or services, allowing dealers to use AI to perform defect detection, based on Big data accurately evaluates prices, matches appropriate car dealers through algorithms, and then uses third-party services on the platform to achieve cross-domain transactions, thereby reducing the operating costs of used cars, improving vehicle disposal capabilities, and making 4S dealers who have tasted the sweetness of 4S dealers subtle China acts as the “source of living water” that drives the innovation of the used car industry.

In a horizontal comparison with Shopify, the SaaS exploration of the second-hand car market has many remarkable points: it is a route of tool empowerment, and a decentralized collaboration model is adopted, which gives merchants enough freedom; both The core pain points of the merchants have been pokemed, the data shortcomings of the traditional model have been made up, and the value chain that helps enterprises shape their competitive advantages has been formed; the focus of service is on the supply side, and the business closed loop is built around the needs of the merchants. At the same time, the merchants There is no need to amortize excessive costs at once.

However, whether this route can be run and whether it can be recognized by participants in the second-hand car market still needs further verification.

03  A small test of 4S dealers

In this “experiment” that may affect the direction of the second-hand car market, 4S dealers have played the role of “demonstrators.”

In May 2020, the State Administration of Taxation of the Ministry of Finance issued a tax reduction policy for second-hand car distribution, and dealer groups such as Yongda Automobile and Zhongsheng Automobile quickly followed up. The relevant person in charge of Yongda Automobile bluntly stated in the media interview: Used car market It is transforming from a “brokerage company + private transaction” model to a large dealer model.

According to the data disclosed in the official financial report, in 2020, Yongda Auto’s used car transaction volume was 52,280 units, a year-on-year increase of 26.6%, and the gross profit of used cars was RMB 175 million, a year-on-year increase of 27.3%; Zhongsheng Motor’s second-hand car transactions in 2020 The volume reached 107,000 units, an increase of 50.0% year-on-year, which was far greater than the 9.9% increase of new cars. Compared with the data of 3.9% overall decline in the used car market in 2020, Yongda Auto and Zhongsheng Auto both exceeded expectations.

And behind the bright growth figures, there are two positive signals hidden:

First, with the dividends of policy deregulation, the consumption potential of the second-hand car market will be further released. With reference to the Ministry of Commerce’s statement on canceling unreasonable restrictions on second-hand car transactions, accelerating the implementation of cross-province registration of second-hand car transactions, and improving relevant policies and measures in the field of second-hand car circulation, the business environment of the second-hand car market is gradually optimizing, or will change more and more. More and more participants have attitudes towards second-hand cars.

Second, as the domestic auto industry shifts from an incremental market to a stock market, dealers are being forced to change. In the demonstration of dealers such as Yongda Automobile and Zhongsheng Automobile, there is no lack of third-party SaaS service empowerment behind it, which indicates that more and more 4S dealers will join the torrent of second-hand car sales. The SaaS solution will gradually go from point to point, and even become a standard configuration for 4S dealers.

What also needs to be faced is that the growth myth of 4S dealers in the used car market is not accidental. Compared with second-hand car dealers of varying sizes, 4S dealers have a lower user trust cost under the effect of brand endorsement, and they also have unquestionable advantages in car sources, marketing and services. Whether the domestic second-hand car market can grow a platform like Shopify, the crux lies in the education of second-hand car dealers and consumers.

For example, the core infrastructure such as car sources, warehousing, logistics, etc. will continue to be upgraded to create a nationally integrated and efficient circulation system, and use digital tools to enhance the operational capabilities of second-hand car dealers. To put it simply, it is to help second-hand car dealers reduce costs and increase efficiency, and get rid of the dependence on profit from asymmetric information. This is also the biggest difficulty in the current second-hand car industry.

For another example, while focusing on the B-end supply chain, gradually educating users to the C-end, with the help of platform certification, insurance services, and transparency of car conditions, to change consumers’ original impression of the second-hand car market. Furthermore, on the basis of influencing consumption habits, second-hand car dealers are forced to change their thinking mode and actively join the second-hand car digital economy.

Optimistically, once the dividends in the second-hand car market are confirmed, more and more players are destined to join, and the existing pattern of the second-hand car industry will most likely be broken. At that time, all participants will look for new outlets. The emergence of Shopify is only a matter of time.

04  Conclusion

People often compare the second-hand car market in China and the United States in order to see the huge potential of China’s second-hand car market anyway.

It is a pity that too many people have overlooked that the prosperity of the second-hand car market in the United States is inseparable from a complete after-sales system, which has complete management regulations to protect consumers. But in the domestic market, it’s a different picture. Even if it’s a new car just mentioned, as long as you open a 4S shop, you will basically only repair it if you encounter a problem, and the situation of the used car will be bleak. It is basically a gambling on luck and there is a problem. Can only demand second-hand car dealers to be responsible.

Fortunately, when policies are releasing dividends for the second-hand car market, some backward links have gradually shown signs of improvement. The first is to lower the threshold for second-hand car transactions, and then improve the quality assurance system step by step, and finally completely change the history of “the water is too deep to dare to touch” in the second-hand car market. In this process, the digitalization, traceability, integration, and refinement of the second-hand car circulation link will be an indispensable step.

What’s more, many dealer groups are already looking for business transformation and upgrading, from focusing on sales to focusing on services. Second-hand cars are one of the key businesses; players including Cheyipai are accelerating the integration of social service capabilities. From 0 to 1, build a complete automotive distribution industry ecosystem; the unresolved pain points of the second-hand car market, such as mixed vehicle sources, long circulation cycles, and low profit margins, are showing signs of improvement…

Of course, there is also a self-evident stimulus: the gross profit margin of a new car is only about 5%, while the gross profit margin of a second-hand car is often around 12%. When the circulation conditions of the used car industry are mature, there is no reason for capital not to favor it, and there is no reason for the market not to rise.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/the-used-car-industry-awaits-shopify/
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